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EGR on diesels is done exclusively for NOx control. In general EGR on a diesel reduces power and efficiency because it drops the specific heat ratio of the combustion gasses. Cooled EGR on a diesel helps because it allows less EGR to be used to control NOx emissions. There is a limit to how much they can cool it before it starts robbing power. If cooled to the point that steam condenses back into water vapor energy must be expended to re boil the water.
Very small amounts of egr can be used to slightly increase power in a diesel. At lower rpms it lowers the peak pressure slows the combustion to better approximate the ideal diesel cycle. It also allows the fuel to spread farther in the combustion chamber and cause more uniform heating of the combustion gases. Unfortunately this low level does almost nothing to control NOx so it is not used in this way.
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